The European Commission (EC) has proposed
abolishing the unlimited state guarantee enjoyed by Irish health
insurer Vhi Healthcare by the end of 2013.
The EC said that since Vhi is a statutory
body, and its statute does not provide for liquidation or
winding up, this means Vhi cannot go bankrupt.
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As a result, the EC said Vhi’s
creditworthiness is improved, providing it with an undue financial
advantage over its competitors.
If no agreement is reached on the proposed
measures within one month, the EC said it might open a state aid
investigation.
Removing the advantage
To remove this advantage, the Commission made
two requests to Ireland; firstly, to “progressively incorporate one
or several” Vhi subsidiaries as private limited companies
governable by Irish law, and secondly, to ensure the effective
removal of the unlimited guarantees by 31 December 2013.
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By GlobalDataJoaquín Almunia, Commission vice
president in charge of competition policy, said: “A level playing field on the Irish market for private medical
insurance can only exist if all operators compete on equal market
terms. The removal of the unlimited state guarantee to the
Voluntary Health Insurance Board is essential to ensure that
competition on this market takes place on the operators’ own
merits.”
Vhi reacted positively to the EC
proposal, saying the measures outlined by the EC form part of a
complex process that will allow Vhi Healthcare make an application
to Ireland’s central bank in order to be authorised by 31st
December 2013, as per the European Court of Justice Ruling in
November 2011.
In a statement, Vhi said: “In order
to progress an application for authorisation, Vhi Healthcare must
satisfy the central bank of Ireland that it has a sustainable
business case over the next three to five years and the
introduction of a robust risk equalisation scheme is a
pre–requisite to that. Vhi Healthcare will require additional
capital to meet the Central Bank’s solvency capital
requirements.”
